October 17, 2015
Amidst a tech boom, Seattle is facing similar problems that Silicon Valley has already seen. Naturally, as demand increases, supply must too, but in commercial real estate, there are physical and economical constraints that majorly impact the city and its surrounding residential community.
Seattle has its unique set of consequences from the influx of business. Not only are rent prices skyrocketing, but the city also fears that these effects will drive away the creative and blue-collar workers. Like San Francisco, both cities have a rich history with the maritime industry and have been hubs for shipbuilding, fishing, and more. With technology firms moving in, there is a resounding fear that blue-collar workers will be losing their space.
However, the city’s mayor, Ed Murray, is implementing ways to combat the latter. For example, he has a goal to build 50,000 homes over ten years, and wants at least 40 percent of them to be low-income residences. The city is also looking to initiate a $15 minimum wage by 2017 to ensure that wages can keep up with the cost of living.
A few months back, the Wall Street Journal reported on the growing pains that Silicon Valley is experiencing. With tech giants like Google and LinkedIn looking to add 5.7 million square feet of office space in Mountain View, California, the city’s farming culture is losing ground, literally. With these increases, the communities face traffic congestion and transportation. To alleviate the impact of congestion, many tech companies have started thinking of innovative solutions, like creating residential apartments in walking distance from work.
Unlike Silicon Valley and Seattle, Los Angeles landlords are actively trying to create a tech hub, as there is a trickle-down economy effect that stems from the tech sector. With high skilled-labor comes higher wages, providing younger workers with more disposable income to spend at restaurants and on rent. Thus, Downtown Los Angeles is creating Class A office space to draw in tech companies with enticing creative office space opportunities.
The vision of a work-live-play environment is becoming a reality in a city that is over populated. As discussed in our post, Brookfield Property Partners has completed 1.2 million square feet of space in the area. Vacancy rates are dropping, pushing the rental rate to increase by eight percent over the last year.
With increasing demand for commercial real estate, each city faces its own set of consequences impacting the community. Luckily, creative developers and planners are finding new ways to accommodate the increased demand.